One of the most important changes that Windows 95 introduced is the use of the folder to organize files, programs, and other items that the Windows OS needs. Previously, Windows used only directories to organize the OS.
A directory is simply an entry in the file-system internal tablesit can contain only files, and those files must be at the file-system level. A folder is a container that can house any type of item (including files, other folders, and custom-information items) from any level in the OS. Thus, folders are more versatile than directories. Folders are powered by a piece of code (a sort of data provider) that enumerates all the items that the folder contains. Architecturally speaking, directories are folders.
Within Windows Explorer, folders look like directories, even if the folders don't contain any files. For example, the Printers folder looks like a regular folder, yet it contains printer names rather than filenames. Each item in the folder represents a piece of hardware rather than a file. . . .